The non-profit world can come with a learning curve, so we’ve compiled a list of commonly used terms to help you navigate our work and how you can participate.
501(c)(3)
The Section of the Internal Revenue Code that designates an organization as charitable and tax-exempt. Most organizations seeking foundation, corporate, or public contributions secure a Section 501(c)(3) classification from the Internal Revenue Service (IRS). Organizations qualifying under this Section include religious, educational, charitable, amateur athletic, scientific or literary groups, organizations testing for public safety, or organizations involved in prevention of cruelty to children or animals. Incourage is recognized by the IRS as a 501(c)(3) tax-exempt charitable organization.
Note: The tax code also sets forth a list of Sections-501(c)(4-26)-to identify other organizations whose function is not solely charitable (e.g., professional or veterans organizations, chambers of commerce, fraternal societies, etc.) that generally are exempt from certain federal income taxes.
Agency Fund
A fund at a community foundation established by a nonprofit organization (agency), for the benefit of the nonprofit organization, where the calculated spending policies are distributed annually to the nonprofit organization to support operations, programs, etc. The minimum required to establish an endowed Agency Fund through Incourage is $10,000. Only donations from the agency are included in this type of fund.
Assets
Cash, stocks, bonds, real estate or other holdings of a foundation. Generally, assets are invested and the income is used to support grants, programs and organizational operations. (See Payout Requirement.)
Bequest
A sum of money or other assets made available to a specified organization upon the donor’s death, as indicated in their will.
Build-A-Fund
A fund built through contributions made over the course of up to five years by an individual, family, business or group of individuals, to reach the minimum amount required to endow a fund.
Charity
In its traditional legal meaning, the word “charity” encompasses religion, education, assistance to the government, promotion of health, relief of poverty or distress, and other purposes that benefit the community. Nonprofit organizations that are organized and operated to further one of these purposes generally will be recognized as exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code (see 501(c)(3)) and generally will be eligible to receive tax-deductible charitable gifts. Incourage is a charitable organization.
Community Foundation
A community foundation is a tax-exempt, nonprofit, autonomous, publicly supported, philanthropic institution composed primarily of permanent funds established by many separate donors for the long-term diverse, charitable benefit of the residents of a defined geographic area. Typically, a community foundation serves an area no larger than a state. Community foundations provide an array of services to donors who wish to establish endowed funds without incurring the administrative and legal costs of starting independent foundations. There are more than 500 community foundations across the United States today. The Cleveland Foundation was the first community foundation established in 1914. Incourage Community Foundation was established in 1994, with its initial name being the Community Foundation of South Wood County.
Community Grant
A grant made/awarded from unrestricted funding, to support nonprofit or tax-exempt organizations and projects with a community benefit.
Community Grants Fund
An unrestricted fund at Incourage Community Foundation to support philanthropic grants. These grants benefit the south Wood County area and support our vision of a community that works well for all. The minimum required to establish a named, endowed, Community Grant Fund through Incourage is $5,000. Incourage also maintains general community grant funds that can accept contributions of any size.
Designated Fund
A fund at a community foundation established by a donor(s) for the benefit of a specific (designated) nonprofit organization where a calculated spending policy amount is distributed annually to the nonprofit organization to support operations, programs, etc. The minimum required to establish an endowed Designated Fund through Incourage is $10,000.
Donor
An individual or organization that makes a donation.
Donor or Committee Advised Fund
A fund at a community foundation where the donor, or a committee appointed by the donor, may suggest eligible charitable recipients for distributions from the fund. The community foundation’s governing body has final authority over all funds and may accept or reject the suggestions.
Donor Advised Fund
A fund at a community foundation that allows donors to make suggestions regarding the recipients of the grants generated by the fund, with the community foundation vetting each suggestion to ensure the charitable organization and the grants meet IRS requirements. The minimum required to establish an endowed Donor Advised Fund through Incourage is $10,000.
Employer Identification Number (EIN)
A nine-digit number assigned by the Internal Revenue Service. Every IRS-designated tax-exempt nonprofit organization has its own EIN.
Endowed Fund
A fund created at a nonprofit organization, such as a community foundation, with gifts from a donor(s), and invested by the organization to maintain a long-term benefit for a specified or unrestricted purpose. The endowed fund may have a minimum balance set by the organization in order to be considered “endowed.”
When the fund has reached its minimum funding balance, a percentage of the fund may be used for annual distributions for charitable purposes (generally based on a spending policy), while the remaining fund continues to exist and grow over time. The minimum amounts required to endow funds at Incourage are as follows: an unrestricted fund is $5,000; an agency, designated, donor advised, or field of interest fund is $10,000; and a scholarship fund is $15,000.
Endowment
A pool of invested assets meant to provide long-term support for charitable purposes. Generally, distributions from the pool of assets will be determined by a calculated spending policy in support of both current distributions as well as long-term asset maintenance and growth.
Field of Interest Fund
A fund at a community foundation that is used for a specific, donor designated, charitable purpose such as education or health research, rather than a specific organization. The minimum required to establish an endowed Field of Interest Fund through Incourage is $10,000. Learn more.
Financial Report
An accounting statement detailing financial data, including income from all sources, expenses, assets and liabilities. A financial report may also be an itemized accounting summary that shows how grant funds were used by a grantee organization. Foundations may require a financial report from grantees.
Fiscal Sponsor
A fiscal sponsor is a nonprofit organization that provides fiduciary oversight, financial management, and other administrative services to help build the capacity of charitable projects. Fiscal sponsorships are useful for organizations that are not yet recognized as tax-exempt under Internal Revenue Code Section 501(c)(3) or that simply have decided that operating under the umbrella of another tax-exempt organization makes sense.
Fiscal Year
A 12-month period around which an organization operates. Most organizations operate either on a calendar year (January – December) or a fiscal year (July – June).
Form 990/Form 990-T
The IRS tax forms filed annually by public charities (private foundations file a Form 990-PF). The IRS uses this form to assess compliance with the Internal Revenue Code. Form 990 lists organization assets, receipts, expenditures and compensation of officers. Form 990-T accounts for any income that is considered to be unrelated business income. Our current Form 990/Form 990-T is listed on our financial page.
Funder
An individual, institution, corporation, community foundation, etc. that provides financial resources, including grants, to a nonprofit organization for projects and/or programs.
Funding Cycle
A chronological pattern of proposal review, decision-making and applicant notification. Some organizations make grants at set intervals (quarterly, semi-annually, etc.), while others operate under an annual cycle. Incourage operates on a proactive basis for grant review and accepts proposals at anytime throughout the year.
Grant
An award of funds to an organization or community-based program or project to support charitable activities.
Grantee
The organization or community-based program that receives a grant.
Grantor
See Funder.
Grantmaking
The process of determining distributions from any of the funds managed by a community foundation.
Grassroots Fundraising
Efforts to raise money from individuals or groups from the local community on a broad basis – often small-sized donations to help raise awareness of an organization and its needs. Typically, an organization engages in grassroots fundraising within its own constituency: people who live in the community served, clients of the services, and those who have a heart for the organization’s mission. Grassroots fundraising activities vary. Seek advice from community foundation staff before you pursue grassroots fundraising activities.
In-kind Contribution
A donation of goods or services rather than cash or appreciated property. Seek advice from community foundation staff before making an in-kind donation.
Internal Revenue Service (IRS)
The federal agency with responsibility for regulating foundations and their activities. Learn more on-line at www.irs.gov.
Letter of Inquiry
A short preliminary proposal that a nonprofit submits before being invited to submit a full grant application. It helps the foundation determine whether a project or program aligns with its funding priorities.
Letter of Intent
A donor’s letter or brief statement indicating intention to make a specific gift. In some cases, this may be considered a pledge.
Matching Grant
A grant or gift made with the specification that the amount involved must be matched on a one-for-one basis or according to some other prescribed formula.
Nonprofit
An incorporation status granted by the state, indicating the organization is formed for a public or mutual benefit, rather than for the purpose of generating profit for its owners. Nonprofit status generally excuses the organization from paying certain state taxes.
Operating Support
A contribution given to support an organization’s day-to-day, ongoing expenses, such as salaries, utilities, office supplies, technology, etc.
Payout Requirement
The minimum amount that a private foundation is required to expend for charitable purposes (includes grants and necessary and reasonable administrative expenses). In general, a private foundation must pay out approximately 5 percent of the average market value of its assets annually. This requirement does not apply to a public community foundation like Incourage.
Philanthropy
The origin of the word philanthropy is Greek and means love for mankind. Today, philanthropy includes the concept of voluntary giving by an individual or group to promote the common good. Philanthropy also commonly refers to grants of money awarded by foundations to nonprofit organizations. Philanthropy directs the contribution of an individual or group to other organizations that in turn direct it toward improving the quality of life for all residents. Philanthropic giving supports a wide variety of activities and causes that promote a healthy and thriving community.
Planned Gift
A gift given for any amount and for any purpose, whether for current or deferred use, which requires the assistance of a professional staff person, a qualified volunteer or the donor’s advisor(s) to complete. In addition, it includes any gift that is carefully considered by a donor in light of estate or financial plans.
Restricted Fund
A type of fund in which the fund beneficiaries and/or uses are specified by the donors.
Scholarship Fund
A fund at a community foundation that provides grants in the form of scholarships to students for educational purposes, in which the eligibility criteria are established by the donor. The minimum required to establish an endowed Scholarship Fund through Incourage is $15,000.
Spending Policy (SP)
The specific amount of an endowed fund eligible for annual distribution based on a calculated percentage. Incourage’s current spending policy is based on 4% of the twelve trailing quarter average of an endowed fund as of September 30 of the current year, for distribution the following year.
Tax-Exempt
A federal status granted by the Internal Revenue Service, which legally excuses the organization from paying certain federal income taxes.
Trust
A legal arrangement created by an attorney as part of a person’s estate or charitable estate planning. While Incourage does not establish or serve as trustee for trusts, it may be named as a beneficiary of a trust or receive distributions from a trust to create or support charitable funds in accordance with the donor’s wishes.
Unrestricted Fund
A fund at a community foundation that is not specifically designated to particular uses by the donor, or for which restrictions have expired or been removed. It can be used at the discretion of the community foundation in support of its mission and vision. The minimum required to establish an endowed Unrestricted Fund through Incourage is $5,000.
